Kerry Logistics Network's (HKG:636) Dividend Is Being Reduced To HK$0.09

Kerry Logistics Network Limited's (HKG:636) dividend is being reduced by 68% to HK$0.09 per share on 22nd of September, in comparison to last year's comparable payment of HK$0.28. The yield is still above the industry average at 8.7%.

View our latest analysis for Kerry Logistics Network

Kerry Logistics Network's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Kerry Logistics Network's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand by 34.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 48%, which is in the range that makes us comfortable with the sustainability of the dividend.

Kerry Logistics Network's Dividend Has Lacked Consistency

Looking back, Kerry Logistics Network's dividend hasn't been particularly consistent. This makes us cautious about the consistency of the dividend over a full economic cycle. The annual payment during the last 9 years was HK$0.11 in 2014, and the most recent fiscal year payment was HK$0.66. This works out to be a compound annual growth rate (CAGR) of approximately 22% a year over that time. Kerry Logistics Network has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

Dividend Growth Is Doubtful

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Over the past five years, it looks as though Kerry Logistics Network's EPS has declined at around 8.4% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Kerry Logistics Network's Dividend

Overall, it's not great to see that the dividend has been cut, but this might be explained by the payments being a bit high previously. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. We would probably look elsewhere for an income investment.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For instance, we've picked out 3 warning signs for Kerry Logistics Network that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.